“You are so special!” I believe this is a sentence that everyone has heard of for at least once or twice in their lives. Yes, people are different, and there is no two identical human-beings in the world, even for twins, they may have different thoughts and characteristics. Different individuals make up into a species, and different species constitute the whole world, which is so rich and colorful because of the diversity!
But then why is the products everyone consumes and the price everyone pays for them so similar when obviously different individuals have different needs and willingness to pay? One biggest challenge is the difficulty to identify those needs and willingness to pay. It’s almost impossible for a producer to knock on every customer’s door and ask what special features he wants to add in the product and how much he is willing to pay. Also, economies of scale can be really helpful in reducing cost when producing one kind of product in a large amount. The inability to unearth and satisfy diverse needs results in consumers putting up with products that are not completely fit for them and paying not in accord with their minds.
However, with the emergence of the information technology, the biggest challenge seems not so challenging anymore. It makes Personalized Price and Personalized Products both possible, enabling not only the sellers to make the largest profits, but also the buyers to be offered the products that completely suitable.
Personalized pricing is the practice of price discriminating final consumers based on their personal characteristics and conduct, resulting in each consumer being charged a price that is a function – but not necessarily equal- to his or her willingness to pay (OECD, 2018). A great example of personalized pricing is used by the hotel website Orbitz. The company uses data such as zip code, type of browser, and even type of device to determine the spending threshold of a website visitor. Then they display prices for each user depending on the data. By pricing for the individual and not for a broader demographic group, companies can earn extra sales that they might otherwise lose (Baldwin, 2018).
Moving upstream along the value chain, more and more companies start to apply the personalize marketing strategy by which companies leverage data analysis and digital technology to deliver individualized messages and product offering to current or prospective customers (Emarsys, 2017). One good example is the personalized vitamins websites. For my personal experience, the whole process is super easy and enjoyable. The only thing a customer needs to do is to answer a few health related questions, which are not difficult at all, then the website will identify the customer’s underlying health needs revealed by the questions and offer the customized vitamin pack which can satisfy those health needs. In this way, both customer experiences and brand loyalty will be brought up to a new high level.
No matter which part of the value chain, by rightfully apply the strategy, personalized service can always bring bigger opportunities.
References:
OECD (2018). Personalized pricing in the digital era, available at: http://www.oecd.org/ officialdocuments/publicdisplaydocumentpdf/?cote5DAF/COMP(2018)13&docLanguage5En (accessed 9 Oct 2020).
G.Baldwin(2018). What’s the Difference Between Dynamic and Personalized Pricing, available at: https://www.omniaretail.com/blog/difference-dynamic-and-personalized-pricing (accessed 9 Oct 2020)
Emarsy(2017). What Is Personalized Marketing, available at: https://emarsys.com/learn/blog/what-is-personalized-marketing/ (accessed 9 Oct 2020)
